Answer:
GDP= 9,872
Explanation:
The Expenditure Approach is a method of measuring GDP by calculating all spending throughout the economy including consumer consumption, investing, government spending, and net exports. This method calculates what a country produces, assuming that the finished goods and services of a country equals the amount spent in the country for that period.
The formula is:
GDP=C+I+G+/-NX
GDP: Gross Domestic Product
(C) consumer spending – this is the amount that all consumers spend on goods and services for personal use.
(I) investment – this is the amount that businesses or owners spend to invest in new equipment or expansions.
(G) government spending – this includes spending on new infrastructure like bridges and roads.
(NX) net exports – this includes spending on a country’s exports minus its spending on imports.
GDP= 6,728+1,767 +1,741+(1,102-1,466)
GDP= 9,872
Compute the future value of $2,000 compounded annually for 20 years at 6 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Compute the future value of $2,000 compounded annually for 15 years at 9 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer:
A) FV= 6414.27
B) FV=2000*(1.09^15)= 7284.97
Explanation:
Giving the following information:
A) Present value= $2,000
Compounded annually for 20 years at 6 percent.
n= 20
i=0.06
B) Present value= $2,000
Compounded annually for 15 years at 9 percent.
n=15
i= 0.09
To calculate the Final Value we need to use the following formula:
FV= Present value*(1+interest rate)^n
A) FV= 2000*(1.06^20)
FV= 6414.27
B) FV=2000*(1.09^15)= 7284.97
Tyler Corporation was organized in 2014. It’s corporate charter authorized the issuance of 50,000 shares of common stock, par value $5 per share, and 10,000 shares of 8% preferred stock, per value $25 per share.
Prepare journal entries for each of the following transactions:
January 1 Sold and issued 45,000 shares of common stock for cash at $ 25 per share
February 1 Sold and issued 5,000 shares of preferred stock for cash of $75 per share.
June 1 Purchased 7,500 shares of common stock in the open market at $24 per share.
August 1 Sold 1,000 shares of the treasury stock at $26 per share.
October 1 Sold another 1,500 shares of the treasury stock at $23 per share.
December 1 Declared dividends totaling $100,000.
Allocations of the dividend to preferred and common stockholders.
December 31 Paid the dividends that were declared.
Answer& Explanation:
cash 1,125,000 (45,000 x 25)
common stock 225,000 (45,000 x 5)
additional paid-in 900,000 (1,125,000 - 225,000)
cash 375,000 ( 5,000 x 75)
common stock 25,000 (5,000 x 5)
additional paid in 50,000 ( 75,000 - 25,000)
Treasury Stock 180,000 ( 7,500 x 24)
Cash 180,000
Cash 26,000
Treasury Stock 24,000 ( 1,000 x 24)
Asdditional paid in TS 2,000 ( 26,000 - 24,000)
Cash 34,500 ( 1,500 x 23)
Additional Paid-in TS 1,500
Treasury Stock 36,000 ( 1,500 x 24)
Dividends 100,000
Dividneds payable 100,000
Dividends payable 100,000
cash 100,000
Company G, which has a 30 percent marginal tax rate, owns a controlling interest in Company J, which has a 21 percent marginal tax rate. Both companies perform engineering services. Company G is negotiating a contract to provide services for a client. Upon satisfactory completion of the services, the client will pay $85,000 cash. Compute the after-tax cash from the contract assuming that Company G is the party to the contract and provides the services to the client. Compute the after-tax cash from the contract assuming that Company J is the party to the contract and provides the services to the client. Compute the after-tax cash from the contract assuming that Company J is the party to the contract, but Company G actually provides the services to the client.
The after-tax cash for Company G and Company J, given the contract value of $85,000 and their respective tax rates, are $59,500 and $67,150. Even if Company G performs the service under the contract of J, the tax is accounted based on J's rate, thus the after-tax cash remains the same for both companies.
Explanation:The after-tax cash that the two companies will get is computed by subtracting the taxes from the total contract value. Company G has a 30 percent marginal tax rate. If it is the party to the contract and provides the services to the client, the tax will be $85,000 * 0.3 = $25,500. Therefore, the after-tax cash for Company G will be $85,000 - $25,500 = $59,500.
Now, let's consider Company J. It has a 21 percent marginal tax rate. If it is the party to the contract and provides the services, the tax will be $85,000 * 0.21 = $17,850. Therefore, the after-tax cash for Company J will be $85,000 - $17,850 = $67,150.
If Company J is the party to the contract, but Company G actually provides the services, the tax will still be calculated based on Company J's marginal tax rate. Thus, the after-tax cash from the contract for these companies remains the same at $67,150.
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Mango Company applies overhead based on direct labor costs. For the current year, Mango Company estimated total overhead costs to be $360,000, and direct labor costs to be $180,000. Actual overhead costs for the year totaled $387,000, and actual direct labor costs totaled $203,000. At year-end, the balance in the Factory Overhead account is a:
Answer:
Balance for the Factory Overhead account: 19,000 credit
Explanation:
We will first, calculate the overhead rate based on the predetermination overhead rate:
[tex]\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate[/tex]
The total manufacturing cost will be distributed over the cost driver. In this case, labor cost:
360,000/180,000 = 2 overhead rate
Then, we calculate the applied overhead 203,000 x 2 = 406,000
Now, the balance for factory overhead account:
Actual overhead: 387,000 debit
payable, accumulated depreicaiton and other 387,000 credit
WIP 406,000 debit
Applied Overhead 406,000 credit
Balance:
406,000 - 387,000 = 19,000 credit
When the store hires two workers, they are able to serve 16 customers per hour. When the store hires three workers they are able to serve 22 customers per hour. Each customer spends an average of $4 in the store. What is the marginal benefit of hiring the third worker? Enter a whole number, with no dollar sign.
Answer: $24
Explanation:
Given that,
Two workers serve = 16 customers per hour
Three workers serve = 22 customers per hour
Each customer spends an average of $4 in the store.
Total revenue from Two workers = 16 × $4
= $64
Total revenue from Three workers = 22 × $4
= $88
Therefore, the marginal benefit of hiring the third worker would be:
= Total revenue from Three workers - Total revenue from Two workers
= $88 - $64
= $24
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed long-term debt of $2.5 million, and the 2015 balance sheet showed long-term debt of $2.65 million. The 2015 income statement showed an interest expense of $100,000. What was the firm’s cash flow to creditors during 2015?The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed long-term debt of $2.5 million, and the 2015 balance sheet showed long-term debt of $2.65 million. The 2015 income statement showed an interest expense of $100,000. What was the firm’s cash flow to creditors during 2015?
Answer:
Total CashFlow to creditors : ($50.000).
Explanation:
Total Cash flow to creditors it's = I - E + B, where I it's Interest, E it's Ending Long Term Debt and B it's Beginning Long Term Debt.
With this, it means we get money from creditors instead of a payment to them.
Answer:
50000
Explanation;
The 2014 balance sheet of Sugarpova’s Tennis Shop, Inc., showed long-term debt of $2.5 million, and the 2015 balance sheet showed long-term debt of $2.65 million. The 2015 income statement showed an interest expense of $100,000. What was the firm’s cash flow to creditors during 2015?
Particulars Amount$
Interest Paid(a) 100,000
Less
Net new borrowings
Long Term debt at the end Of 2015 2650000
Less:Long Term debts in the beginning 2500000
Net new borrowings(b) 150000
Cash flow to creditors(a)-(b) 50000
cash flow to credits during 2015 is 50000
Mr. E, a petroleum engineer, earns an $72,500 annual salary, while Mrs. E, a homemaker, has no earned income. Under current law, the couple pays 20 percent in state and federal income tax. Because of recent tax law changes, the couple’s future tax rate will increase to 28 percent. If Mrs. E decides to take a part-time job because of the rate increase, how much income must she earn to maintain the couple’s after-tax disposable income? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Answer:
It will require an income for 80,556 before taxes
Explanation:
Fiorst, we will calculate the current tafter tax income:
72,500 x 20% = 14,500 tax expense
72,500 - 14,500 = 58,000 after-tax income
Now, we will calculate the pre-tax income to keep the same after-tax income with the new rate:
pretax income x ( 1 - new tax rate) = 58,000
pretax income x ( 1 - 0.28) = 58,000
pretax income = 58,000/0.72 = 80,555.56
At this level, Mr E will obtain the same after-tax income
Final answer:
To maintain the couple's disposable income after the tax rate change from 20% to 28%, Mrs. E must earn an additional $8,056 based on the calculation of their current after-tax income and the shortfall created by the increased tax rate.
Explanation:
To calculate how much income Mrs. E must earn to maintain the couple's after-tax disposable income after the tax rate increase from 20% to 28%, we must first determine their current after-tax income. With Mr. E's current salary of $72,500 and a tax rate of 20%, the after-tax income is calculated as follows:
Calculate the total tax paid: $72,500 * 20% = $14,500.Determine after-tax income: $72,500 - $14,500 = $58,000.Next, we calculate the new after-tax income with the increased tax rate of 28%:
Calculate the total tax paid under the new rate: $72,500 * 28% = $20,300.Determine after-tax income with the new tax rate: $72,500 - $20,300 = $52,200.Now, to maintain their original after-tax income of $58,000, we need to find out how much Mrs. E needs to earn:
Calculate the shortfall due to the new tax rate: $58,000 - $52,200 = $5,800.Find out how much gross income is needed to cover the shortfall, considering the new 28% tax rate. If $X is the income needed, then $X - ($X * 28%) = $5,800.Solve for $X: $X = $5,800 / (1 - 0.28) = $5,800 / 0.72 = $8,055.55, which when rounded to the nearest whole dollar is $8,056.Therefore, Mrs. E must earn an additional $8,056 to maintain the couple's after-tax disposable income at the current level, accounting for the tax rate increase to 28%.
If the interest rate is 7.5 percent, then what is the present value of $4,000 to be received in 6 years?
a. $3,040.63
b. $2,420.68
c. $2,996.33
d. $2,591.85
Answer:
d. $2,591.85
Explanation:
To solve we can use the present value formula defined by
[tex]PV=\frac{FV}{(1+r)^t}[/tex]
where PV is present value, FV is future value, t is time and r is the interest rate , we can replace the values given in the question. Where 4000 is the future value, the time is t=6 years, and the interest rate is r=0.075, so we get
[tex]PV=\frac{4000}{(1+0.075)^6}=2,591.85[/tex]
The present value of $4,000 to be received in 6 years at a 7.5 percent interest rate is approximately $2,556.05, with the closest answer choice being option d, $2,591.85.
Explanation:To calculate the present value of $4,000 to be received in 6 years at an interest rate of 7.5 percent, we apply the present value formula: Present Value = Future Value / (1 + r)^n, where 'r' is the interest rate and 'n' is the number of years. Plugging our numbers into the formula gives us Present Value = $4,000 / (1 + 0.075)^6.
Performing the calculation:
Present Value = $4,000 / (1.075)^6 = $4,000 / 1.5648 approximately.
Present Value = $2,556.05 approximately.
Although none of the provided options exactly match this result, the closest to this computed value is option d, $2,591.85.
On January 1, 2016, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2018, Jacob Inc. sold the truck for $30,000. What amount of gain or loss should Jacob Inc. record on December 31, 2018?
A.Loss, $3,000.
B.Loss, $18,000.
C.Gain, $22,000.
D.Gain, $5,000.
Answer:
Gain= $5000
Explanation:
Giving the following information:
On January 1, 2016, commercial truck for $48,00
Straight-line depreciation method.
Useful life of eight years.
Residual value of $8,000.
On December 31, 2018, Jacob Inc. sold the truck for $30,000.
Annual depretiation= (purchase value-residual value)/useful years
Annual depretiation= (48000-8000)/8=5000
Accumulated depreciation= 5000*2 years= 10000
Book value at second year= purchase value-accumulated depreciation= 38000
Gain/Loss= Sell price- book value= 43000-38000= $5000
Grand-cola spends $3 on direct materials, direct labor, and variable manufacturing overhead for every unit (12-pack of soda) it produces. Fixed manufacturing overhead costs
$3million per year. The plant, which is currently operating at only 80 %
of capacity, produced 15 million units this year. Management plans to operate closer to full capacity next year, producing 25
million units. Management doesn't anticipate any changes in the prices it pays for materials, labor, and manufacturing overhead.
1.
What is the current total product cost (for the 15 million units), including fixed and variable costs?
2.
What is the current average product cost per unit?
3.
What is the current fixed cost per unit?
4.
What is the forecasted total product cost next year (for the25 million units), including fixed and variable costs?
5.
What is the forecasted average product cost next year?
6.
What is the forecasted fixed cost per unit?
7.
Why does the average product cost decrease as production increases?
Answer:
Instructions are listed below
Explanation:
Giving the following information:
Q=15 million
Q*=25 million
Unitary variable cost= $3
Fixed manufacturing overhead costs $3million per year
A) For Q:
Total cost= 3000000+15000000*3= $63000000
B) Average cost per unit=63000000/15000000=$4.2
C) Fixed cost per unit= 3000000/15000000= $0.2
D) Q*=25000000
Total cost= 30000000+25000000*3=$78000000
E) Fixed cost per unit= 3000000/25000000= $0.12
D) It decreases because the fixed costs are distributed by more units.
The current total product cost is $45 million, the current average product cost per unit is $3, the current fixed cost per unit is $0.20. The forecasted total product cost next year is $75 million, the forecasted average product cost next year is $3, and the forecasted fixed cost per unit is $0.12. The average product cost decreases as production increases due to the spreading of fixed costs over a larger number of units.
Explanation:1. The current total product cost, including fixed and variable costs, can be calculated by multiplying the number of units (15 million) by the total cost per unit ($3). So the current total product cost is $45 million.
2. The current average product cost per unit can be calculated by dividing the current total product cost ($45 million) by the number of units (15 million). So the current average product cost per unit is $3.
3. The current fixed cost per unit is calculated by dividing the fixed manufacturing overhead costs ($3 million) by the number of units (15 million). So the current fixed cost per unit is $0.20.
4. The forecasted total product cost next year, including fixed and variable costs, can be calculated by multiplying the number of units (25 million) by the total cost per unit ($3). So the forecasted total product cost next year is $75 million.
5. The forecasted average product cost next year can be calculated by dividing the forecasted total product cost next year ($75 million) by the number of units (25 million). So the forecasted average product cost next year is $3.
6. The forecasted fixed cost per unit is calculated by dividing the fixed manufacturing overhead costs ($3 million) by the number of units (25 million). So the forecasted fixed cost per unit is $0.12.
7. The average product cost decreases as production increases because the fixed costs are spread over a larger number of units. This means that the fixed cost per unit decreases as more units are produced, resulting in a lower average product cost.
In the JK partnership, Jacob's capital is $140,000, and Katy's is $40,000. They share income in a 3:2 ratio, respectively. They decide to admit Erin to the partnership. Each of the following questions is independent of the others.
Refer to the information provided above. Jacob and Katy agree that some of the inventory is obsolete. The inventory account is decreased before Erin is admitted. Erin invests $38,000 for a one-fifth interest. What are the capital balances of Jacob and Katy after Erin is admitted into the partnership?
Jacob Katy
A. $140,000 $40,000
B. $134,000 $36,000
C. $123,200 $28,800
D. $118,400 $25,600
Answer:
C. $123,200 $28,800
Explanation:
Provided information, we have:
Existing capital = $140,000 + $40,000 = $180,000
Admission of Erin for 1/5th share = $38,000
Total capital as per Erin share = $38,000 [tex]\times[/tex] 5 = $190,000
But actual total capital = $180,000 + $38,000 = $218,000
Therefore, inventory written off = $218,000 - $190,000 = $28,000
Jacob = $28,000 [tex]\times[/tex] 3/5 = $16,800
Katy = $28,000 [tex]\times[/tex] 2/5 = $11,200
Therefore,
Jacob's balance = $140,000 - $16,800 = $123,200
Katy's Balance = $40,000 - $11,200 = $28,800
The SRT partnership agreement specifies that partnership net income be allocated as follows:
Partner S Partner R Partner T
Salary allowance $20,000 $25,000 $15,000
Interest on average capital balance 10% 10% 10%
Remainder 30% 30% 40%
Average capital balances for the current year were $60,000 for S, $50,000 for R, and $40,000 for T.
Refer to the information given. Assuming a current year net income of $125,000, what amount should be allocated to each partner?
Partner S Partner R Partner T
A. $15,000 $15,000 $20,000
B. $37,500 $37,500 $50,000
C. $41,000 $45,000 $39,000
D. $42,000 $48,000 $35,000
Answer: Option (C) is correct.
Explanation:
Given that,
Partner S:
Salary allowance = $20,000
Interest on average capital balance = 10% of 60,000
= $6,000
Average capital balances for the current year = $60,000
Remainder = 30% of 50,000
= $15,000
Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder
= $20,000 + $6,000 + $15,000
= $41,000
Partner R:
Salary allowance = $25,000
Interest on average capital balance = 10% of 50,000
= $5,000
Average capital balances for the current year = $50,000
Remainder = 30% of 50,000
= $15,000
Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder
= $25,000 + $5,000 + $15,000
= $45,000
Partner T:
Salary allowance = $15,000
Interest on average capital balance = 10% of 40,000
= $4,000
Average capital balances for the current year = $40,000
Current year net income = $125,000
Remainder = 40% of 50,000
= $20,000
Amount should be allocated = Salary allowance + Interest on average capital balance + Remainder
= $15,000 + $4,000 + $20,000
= $39,000
Workings:
Salary allowed = $20,000 + $25,000 + $15,000
= $60,000
Interest on average capital balance = $6,000 + $5,000 + $4,000
= $15,000
Total = Salary allowed + Interest on average capital balance
= $60,000 + $15,000
= $75,000
Remainder = Current year net income - Total
= $125,000 - $75,000
= $50,000
On January 1, 2018, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2019, the truck was exchanged for a new truck valued at $60,000. Jacob received a trade allowance of $35,000 on the exchange with the remaining $25,000 paid in cash. What amount of gain or loss should Jacob Inc. record on December 31, 2019?
A. Loss, $18,000.
B. Gain, $5,000.
C. Loss, $38,000.
D. Loss, $3,000.
Answer:
option (D) loss, $3,000
Explanation:
Given:
price of the truck = $48,000
estimated residual value = $8,000
Exchange price of the truck = $60,000
Trade allowance = $35,000
Since, straight line depreciation is given, thus,
Total depreciation = [tex]\frac{\textup{48,000−8,000}}{\textup{8}}[/tex]
or
Total depreciation = $5,000 per year
Therefore,
the book value after two years
= Price of truck - total depreciation in two years
or
= $48,000 − ($5,000 × 2 years)
= $38,000
Now,
a trade allowance received ( i.e $35,000 ) is less than the book value
therefore a loss is recorded
The amount of loss = (Book value - trade allowance received)
or
The amount of loss = $38,000 - $35,000 = $3,000
Hence, correct answer is option (D) loss, $3,000
Alumbat Corporation has $800,000 of debt outstanding, and it pays an interest rate of 10 percent annually on its bank loan. Alumbat's annual sales are $3,200,000; its average tax rate is 40 percent; and its net profit margin on sales is 6 percent. If the company does not maintain a TIE ratio of at least 4 times, its bank will refuse to renew its loan, and bankruptcy will result. What is Alumbat's current TIE ratio?
Answer:
The company's TIE is 5
Which is above the requirement of the bank.
Explanation:
TIE = income before interest and taxes / interest expense
The first step, is calculate the interest expense:
debt outstanding x debt rate
interest expense: 800,000 x 10% = 80,000
(if there were more than one type of debt, then we should calculate all the interest expense and add them together)
Then we calculate the EBIT (earnings before interest and taxes)
3,200,000 sales
x 6% profit margin:
192,000 net income.
This is the income after taxes and interest
we need to discount this figures.
(EBIT - interest expense) x ( 1 - tax-rate) = net income
(EBIT - 80,000) x ( 1 - 40%) = 192,000
EBIT - 80,000 = 192,000/0.6
EBIT = 320,0000 + 80,000 = 400,000
Now we are able to calculate the TIE ratio:
400,000/80,000 = 5
Final answer:
Alumbat Corporation's current TIE ratio is 4. This is calculated by first determining the EBIT from the annual sales and net profit margin, and then dividing by the annual interest expenses.
Explanation:
Calculation of Alumbat's Current TIE Ratio
To calculate Alumbat Corporation's Times Interest Earned (TIE) ratio, we first need to determine its earnings before interest and taxes (EBIT). The net profit margin on sales is 6%, which gives us a net income (NI) of 6% of $3,200,000. We can calculate EBIT by dividing NI by (1 - tax rate), as EBIT * (1 - tax rate) = NI. Subsequently, we use the formula TIE ratio = EBIT / interest expenses to find out the TIE ratio.
The interest expenses for Alumbat are 10% of the $800,000 debt, which is $80,000 annually. With an annual sales figure of $3,200,000 and a net profit margin of 6%, Alumbat's net income is $192,000.
EBIT = $192,000 / (1 - 0.40) = $320,000
Therefore, Alumbat's current TIE ratio is calculated as follows:
TIE ratio = EBIT / Interest Expenses = $320,000 / $80,000 = 4
With a TIE ratio of 4, Alumbat Corporation meets its bank's requirement to maintain a TIE ratio of at least 4 times.
Rand Corporation acquires Southern Company's assets and liabilities for $20,000,000 in cash. At the date of acquisition, Southern's balance sheet reported assets of $75,000,000 and liabilities of $65,000,000. Investigation reveals that Southern's reported plant assets are overvalued by $1,400,000. Rand reports how much goodwill on this acquisition?
Answer: $8,600,000
Explanation:
Acquire Southern Company's assets and liabilities in cash = $20,000,000
Southern's balance sheet reported,
Assets = $75,000,000
Liabilities = $65,000,000
plant assets are overvalued by $1,400,000
Actual Value of Southern's Assets = Total Fair Value - Overvaluation
= $75,000,000 - $1,400,000
= $73,600,000
Goodwill = Actual Value of Southern's Assets - Value of Liabilities
= $73,600,000 - $65,000,000
= $8,600,000
Final answer:
Goodwill is calculated by subtracting the fair value of the net assets of Southern Company from the purchase price paid by Rand Corporation. With the plant assets overvalued by $1,400,000, the adjusted net assets are $8,600,000 and the resulting goodwill is $11,400,000.
Explanation:
The student is asking how to calculate the goodwill resulting from Rand Corporation's acquisition of Southern Company. To determine goodwill, we subtract the fair value of the identifiable net assets acquired from the purchase price. First, we need to adjust the assets and liabilities reported on Southern's balance sheet to reflect their fair value. Southern's plant assets were overvalued by $1,400,000; thus, we subtract this from the reported assets value of $75,000,000 to get $73,600,000. Next, calculate the net assets by subtracting liabilities from assets ($73,600,000 - $65,000,000 = $8,600,000). Finally, we subtract this net assets figure from the cash paid by Rand Corporation ($20,000,000 - $8,600,000 = $11,400,000), which is the amount of goodwill to be reported.
An uncontrollable aspect of the domestic environment that can have a direct effect on the success of a foreign venture is:
level of technology. structure of distribution. economic climate. cultural forces. geography and infrastructure.
Answer: Economic climate
Explanation: In simple words, the view of economists, businesses and investors on the economic conditions of a country is its economic climate. It constitutes factors such as job market, stock market and credit availability etc.
These factors are domestic and could not be controlled by any authority completely. The fluctuations in such factors exist in every economy.
These factors could affect any venture from foreign. The needs of resources for such a venture like capital or customers etc is highly dependent on the constituents of economic climate.
Thus, the correct answer is economic climate.
Due to a recession, expected inflation this year is only 4.25%. However, the inflation rate in Year 2 and thereafter is expected to be constant at some level above 4.25%. Assume that the expectations theory holds and the real risk-free rate (r*) is 3.5%. If the yield on 3-year Treasury bonds equals the 1-year yield plus 0.5%, what inflation rate is expected after Year 1? Round your answer to two decimal places.
Answer:
inflation rate after 1 year is 5.00%
Explanation:
expected inflation = 4.25%
risk-free rate (r) = 3.5%
Treasury bonds = 1-year yield plus 0.5%
to find out
what inflation rate is expected after Year 1
solution
we say that yield on 1st year treasury bond is here
r1 = r + inflation rate = 3.5 + 4.25 = 7.75 %
and in 3rd year bond bond value is
r3 = r1 + 0.5% = 7.75 + 0.5 = 8.25 %
and
r3 = r + inflation3
so inflation3 = 8.25 - 3.5 = 4.75 %
so
for 1st year inflation is = 4.25 %
and for 2nd year inflation is = I
and for 3rd year inflation is = I
so mean of these
[tex]\frac{4.28 + I + I}{3} = 4.75[/tex]
so I = 5.00 %
so
inflation rate after 1 year is 5.00%
During the late nineteenth century, the United States experienced a period of sustained deflation, or a falling price level. Explain in terms of the quantity theory of money how a deflation is possible. Is it necessary for the quantity of money to decline for deflation to occur?
Answer:
It is not necessary a decline in quantity of money for deflation to occur.
The quantity theory of money states that if money supply and velocity of circulation don't change economic growth (positive change in GDP) will result in declining price levels
Explanation:
The quantity of money theory states that
[tex]M\times V=P\times Y[/tex]
where M is the money supply, V is the velocity of circulation, P is the price level and Y is the GDP
We can put this equation in terms of percentage changes, which gives
[tex]\hat{M}+\hat{V}=\hat{P}+\hat{Y}[/tex]
where the [tex]\hat{M}[/tex] denotes the percentage change in the money supply, and similarly for the other variables.
Then for the percentage change in prices to be negative we have that
[tex]\hat{P}<0\hat{M}+\hat{V}-\hat{Y}[/tex]
since
[tex]\hat{P}= \hat{M}+\hat{V}-\hat{Y}[/tex]
[tex]\hat{M}+\hat{V}-\hat{Y}<0[/tex]
So if the there's no change in circulation velocity or gdp, then inflation can occur if there's a decline in money supply (percentual change in M is negative).
But it also could be other scenarios:
1. money supply or output did not change and velocity of circulation decreased
2. money supply and velocity remained constant but GDP grew
The US Securities and Change Commission (SEC), a US federal agency, is considered to be an investor’s advocate. Its purpose is to protect investors, maintain market integrity, and facilitate capital formation. Under the Sarbanes–Oxley Act of 2002, the SEC requires CFOs to certify that the firm’s:
(A) Growth plans are on track
(B) Shareholders are protected
(C) Financial statements are audited
(D) Earnings numbers are accurate
Answer:
(D) Earnings numbers are accurate
Explanation:
Under the Sarbanes–Oxley Act of 2002, the SEC requires CFOs to certify that the firm’s financial statements should represent true and accurate amounts. It does contain any false commitment which affects the overall shareholder decisions.
Moreover, the top manager of the company checks the accuracy of the financial reports which contains important and valuable information about the company.
So, all options are incorrect except D.
In the context of supply chain management, which of the following is true of adaptability?
a. It helps in overcoming short-term fluctuations in the supply chain.
b. It can be enhanced by making a series of make-or-buy decisions.
c. It involves aligning the interests of various elements in the supply chain.
d. It focuses on achieving power and trust.
Answer: In the context of supply chain management "b. It can be enhanced by making a series of make-or-buy decisions." is TRUE of adaptability.
Explanation: Adaptability is basically how the company has to adapt the changes, to new technologies so as not to be left behind in addition to obtaining multiple financial and administrative benefits.
Firm A produces desks. It is situated in the US but imports wood from Brazil. Last year it imported $8,000 in lumber and sold 100% of its production for a total value of $56,000 (assume transportation costs are negligible). What was the total value added by this firm to the economy (in terms of GDP) last year (in dollars)?
(A) 56,000
(B) 64,000
(C) 48,000
Answer:
The correct answer is C: 48000
Explanation:
The Expenditure Approach is a method of measuring GDP by calculating all spending throughout the economy including consumer consumption, investing, government spending, and net exports. This method calculates what a country produces, assuming that the finished goods and services of a country equals the amount spent in the country for that period.
The formula is:
GDP=C+I+G+/-NX
GDP: Gross Domestic Product
(C) consumer spending – this is the amount that all consumers spend on goods and services for personal use.
(I) investment – this is the amount that businesses or owners spend to invest in new equipment or expansions.
(G) government spending – this includes spending on new infrastructure like bridges and roads.
(NX) net exports – this includes spending on a country’s exports minus its spending on imports.
AddedGDP= 56000-8000
AddedGDP= 48000
Bowyer Driving School’s 2014 balance sheet showed net fixed assets of $3 million, and the 2015 balance sheet showed net fixed assets of $3.7 million. The company’s 2015 income statement showed a depreciation expense of $200,000. What was net capital spending for 2015? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Answer: $900,000
Explanation:
Net fixed assets(2014) = $3 million
Net fixed assets(2015) = $3.7 million
Depreciation expense = $200,000
Net capital spending for 2015 = closing balance of 2015 - opening balance of assets + depreciation for the year
= $3,700,000 - $3,000,000 + $200,000
= $900,000
Therefore, the net capital spending for the year 2015 is $900,000.
Retained earnings at the beginning and ending of the accounting period were $650 and $1,400, respectively. Revenues of $2,500 and dividends paid to stockholders of $550 were reported during the period. What was the amount of expenses reported for the period?
Answer:
The amount of expenses reported for the period is $1,200
Explanation:
For computing the amount of expense, we have to apply the formula which is shown below:
Ending retained earning balance = Beginning retained earning balance + revenues earned - cash dividend paid - expenses incurred
$1,400 = $650 + $2,500 - $550 - expenses incurred
$1,400 = $2,600 - expenses incurred
So, the expenses incurred would be
= $2,600 - $1,400
= $1,200
Workers and management agree on a contract that gives a 5% wage increase for each of the next three years. Everyone expected 3% inflation but inflation turned out to be 5% per year. Then at the end of three years...
a. real wages will be higher than was expected.
b. real wages will have fallen
c. nominal and real wages will have changed by the same percentage.
d. real wages will be lower than was expected.
Answer:
The correct option is (d)
Explanation:
Real wages are nominal wages less inflation. Nominal wage is not adjusted for inflation. Everyone had expected an inflation of 3% per year while increase in wages per year is 5%. This implied that they will expect real wage of 2% (5% - 3%) per year.
However, it turned out that inflation was 5% per year. This means that real wages were actually 0% (5% - 5%). There was no increase in real wages at all. So, they received lower real wage (actually nil) as against expected real wage of 3% per year.
Conner Enterprises issued $120,000 of 10%, 5-year bonds with interest payable semi annually. Determine the issue price of the bonds are priced to yield (a) 10%, (b) 8%, and (c) 12%. Use financial calculator or Excel to calculate answers. Round answers to the nearest whole number.
The price of bonds issued by Conner Enterprises will vary based on the market yield. A bond with a 10% coupon rate will be sold at a premium if the market yield is 8%, at par if the yield is 10%, and at a discount if the yield is 12%.
Explanation:The student's question is about the pricing of bonds issued by Conner Enterprises at different yield rates. When the yield rate matches the coupon rate, the bond is sold at face value. However, if the market interest rates are lower than the coupon rate, the bonds will sell for a premium; conversely, if market rates are higher, the bonds will sell at a discount.
For a bond with a 10% coupon rate and a market yield of 10%, the price would be at par, meaning the issue price would equal the face value, or $120,000. If the bonds were priced to yield 8%, the price would be higher than $120,000 because the bond's fixed interest payments are more attractive compared to the market rate. Conversely, if the bonds were priced to yield 12%, the issue price would be less than $120,000, as the coupon rate is no longer as attractive as the new market rate.
Using the example of the water company bond, if interest rates rise, the bond will be sold for less than its face value due to the lower interest rate compared to the market rate. Similarly, if we calculate the price for a bond at an interest rate of 9% using the formula given, we can determine the actual price someone would be willing to pay for it.
Cornerstone, Inc. has $125,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $45,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $23,000. There the goods could be sold for $80,000. What alternative is more desirable and what is the relevant cost for that alternative? A. Sell "as is," $125,000. B. Clean and ship to outlet center, $23,000. C. Clean and ship to outlet center, $103,000. D. Clean and ship to outlet center, $148,000. E. Neither alternative is desirable, as both produce a loss for the firm
Answer:
It is better to cleaned and shipped to the firm's outlet center at a cost of $23,000 to be sold at $80,000
Explanation: In alternative A) the firm loss is $80,000 ($125,000-$45,000)
In alternative E) all $125,000 is lost
In alternative B, C and D) the loss is $68,000 ($125,000-$80,000+$23,000)
Relevant costs are those evitable, that are cause of a manager decision related to an specific business decision.
The only cost that can be avoided in these example is the cost of $23,000 so the goods can be cleaned and shipped to the firm's outlet center
To determine the more desirable alternative, we compare costs and revenues for each option. Option B is more desirable with a relevant cost of $23,000. The correct option is B.
Explanation:To determine which alternative is more desirable, we need to compare the costs and revenues associated with each option. Option A is to sell the inventory 'as is' for $45,000. Option B is to clean and ship the goods to the outlet center at a cost of $23,000 and sell them for $80,000.
For option A, the relevant cost is the cost of carrying the inventory, which is $125,000.
For option B, the relevant cost is the cost of cleaning and shipping, which is $23,000.
Comparing the relevant costs, option B is more desirable. The relevant cost for option B is $23,000. The correct option is B.
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The following data have been recorded for recently completed Job 450 on its job cost sheet. Direct materials cost was $2,057. A total of 32 direct labor-hours and 216 machine-hours were worked on the job. The direct labor wage rate is $21 per labor-hour. The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $29 per machine-hour. The total cost for the job on its job cost sheet would be:
Answer:
Total cost= $8993
Explanation:
Total manufacturing cost is the aggregate amount of cost incurred by a business to produce goods in a reporting period.
Generally accepted accounting principles require that the cost of goods sold shall consist of:
the cost of direct materials
the cost of direct labor
the cost of manufacturing overhead
In this exercise:
direct materials= $2057
direct labor= 32hours*$21=$672
manufacturing overhead= 216hours*$29= $6264
Total cost= 2057 + 672 + 6264= $8993
Honda Motor Company is considering offering a $ 1 comma 800 rebate on its minivan, lowering the vehicle's price from $ 30 comma 200 to $ 28 comma 400. The marketing group estimates that this rebate will increase sales over the next year from 42 comma 000 to 53 comma 900 vehicles. Suppose Honda's profit margin with the rebate is $ 5 comma 650 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea?
Answer:
Taking into consideration only the income, the increase in unit sales will not increase the income of Honda. It can impact in other ways, like a decrease in inventory.
Explanation:
Giving the following information:
Honda Motor Company is considering offering an $1800 rebate on its minivan
New price $30200
Old price $28400.
The marketing group estimates that this rebate will increase sales over the next year from 42000 to 53900 vehicles.
Honda's profit margin with the rebate is $5650 per vehicle.
Normal price:
Income= (5650+1800)*42000= $312,900,000
New price:
Income= 5650* 53900= $304,535,000
Taking into consideration only the income, the increase in unit sales will not increase the income of Honda. It can impact in other ways, like a decrease in inventory.
The following information relates to Carried Away Hot Air Balloons, Inc.:Advertising Costs $16,800Sales Salary 15,200Sales Revenue 570,000President's Salary 51,000Office Rent 55,000Manufacturing Equipment Depreciation 1,500Indirect Materials Used 5,700Indirect Labor 10,300Factory Repair and Maintenance 860Direct Materials Used 23,710Direct Labor 34,600Delivery Vehicle Depreciation 930Administrative Salaries 22,400How much was Carried Away's manufacturing overhead?
The manufacturing overhead of Carried Away Hot Air Balloons, Inc. is calculated by summing up all the indirect costs associated with manufacturing, which amounts to $18,360.
Explanation:To calculate the manufacturing overhead of Carried Away Hot Air Balloons, Inc., we need to sum up all the indirect costs associated with the production, ignoring any expenses that don't apply directly to the manufacturing process. In this question, the components of manufacturing overhead are Indirect Materials Used ($5,700), Indirect Labor ($10,300), Factory Repair and Maintenance($860), and Manufacturing Equipment Depreciation ($1,500).
Adding these four expenses together, we get:
$5,700 + $10,300 + $860 + $1,500 = $18,360
Hence, Carried Away's manufacturing overhead is $18,360.
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A lottery claims its grand prize is $5 million, payable over 5 years at $1 comma 000 comma 000 per year. If the first payment is made immediately, what is the grand prize really worth? Use an interest rate of 4%.The real value of the grand prize is $nothing. (Round your response to the nearest dollar.)
Answer:
present value of the prize: 4,451,822 dollars
Explanation:
we will calcualte the present value of an annuity-due of 5 payment of 1,000,000 discount at 4%
[tex]C \times \frac{1-(1+r)^{-time} }{rate}(1+r) = PV\\[/tex]
C 1,000,000
time 5
rate 0.04
[tex]1000000 \times \frac{1-(1+0.04)^{-5} }{0.04}(1+0.04) = PV\\[/tex]
PV $4,451,822.3310
This will be the present value of the prize today